Ballmer Cancels Plans, Holds Emergency Talks with EU

Just a day before he was supposed to appear onstage in Las Vegas, Nevada, for a keynote address at the Microsoft Management Summit (MMS) 2004, Microsoft CEO Steve Ballmer abruptly canceled those plans. Instead, he flew to Brussels, Belgium, to enter into intense closed-door negotiations with European Union (EU) Competition Commissioner Mario Monti in a bid to reach a last-minute settlement in the company's antitrust case there. Separately, the EU said yesterday that it will announce its verdict against Microsoft on March 24--a week from today--barring any settlement.

Representatives of Microsoft and the EU confirmed the talks separately. "Yes, there's been a meeting today," an EU spokesperson said. "Discussions are ongoing. That's all I'll say." A Microsoft spokesperson noted that "discussions are ongoing. We are actively engaged with the Commission."

Sources close to the talks say that EU officials are using an unusual and potentially effective negotiation strategy: Rather than offering to drop requirements, the EU is asking Microsoft to make more concessions in its settlement than the company would be forced to accept in a court ruling. This strategy stands in sharp contrast to the negotiation techniques the US Department of Justice (DOJ) employed when it essentially handed Microsoft a huge victory during its antitrust settlement, even though the software giant was thoroughly defeated in court and found to be an abusive monopolist. In one example of the EU's strategy that "The Wall Street Journal" cited, the EU's draft ruling stipulates that potential changes to Windows apply only to European markets but, for the settlement to be approved, the EU is requiring that Microsoft make the changes worldwide.

Tactics notwithstanding, analysts who are covering the high-stakes European antitrust battle have concluded that Ballmer's arrival in Brussels signals that the settlement talks are reaching an end. He'll either close the deal now or walk away from the table and force his company to face several more years of often-embarrassing and potentially damaging legal battles.

The biggest EU concern is still Windows Media Player (WMP), which Microsoft has been bundling into the Windows OS since the early 1990s. In recent years, however, WMP has become more capable as consumer needs for digital media have risen dramatically, and now several competitors believe that WMP's integration with the OS gives the company an unfair advantage. The EU wants Microsoft to offer a stripped-down version of Windows that doesn't include the media player.

Also on the plate is server interoperability. The EU charges that Microsoft doesn't offer competitors enough technical information to let them write software applications, server software, and services that work well with Microsoft server products. By withholding this crucial information, the EU says, Microsoft is in the process of securing another dominant market that will leave competitors unfairly disadvantaged.

Ballmer isn't the first Fortune 100 CEO to appear before the EU's antitrust officers. In 2001, General Electric (GE) CEO John Welch Jr. unsuccessfully attempted to convince the EU that his company's proposed takeover of Honeywell was in the public interest. The EU ruled that the companies couldn't merge because doing so would create a single company with too much market power.